General Motors Is Much Better Than Ford & Here’s Why

While automakers like Ford (F) have performed terribly this year, the likes of General Motors (GM) have managed to remain flat this year despite the difficulties in the sector.

In the most recent quarter, General Motors reported earnings per share of $1.86, $0.35 better than the analysts’ estimates. The company’s revenue came in at $42.4 billion, again beating the analysts’ estimates by $3.47 billion whilst signifying a surge of 11.1 percent year over year.

General Motors detailed that its sales in China escalated 18 percent to record 270,529 vehicles, powered by robust sales of high profit luxury cars as well as SUVs.

The company has several joint ventures with native Chinese auto manufacturers, but it shared its sales results by brand instead of reporting at the joint venture level.

Buick, Cadillac, Chevrolet, and the China-only Baojun and Wuling brands are the partners of General Motors. Out of the partners, Cadillac sold 8,757 vehicles in China, recording the strongest growth (90 percent compared to that a year ago) among all its brands. General Motors has managed to share sturdy sales gain in China, whereas its foremost competitor Ford has lost some ground during the last year to trivial domestic Chinese players.

At present, General Motors’ dividend yield is around 4.9 percent.

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The dividend yield appears very generous, but its sustainability may be a concern. Investors will lose confidence in the company if it cuts the dividend mainly due to the economy slowdown down the future. As a matter of fact, the automobile sector is a cyclical business, as profits escalate through good times and drops as auto sales slow during downturn.

However, General Motors is formerly prepared to face the downturn condition. General Motors has lowered its costs enough so as to be profitable till the yearly auto sales in the United States remain over 10.5 million.

It is well known to every investor that General Motors Europe has lost billions throughout the past 15 years. However recently, a dogged turnaround struggle has been displaying positive signs. The company has finally strategized to integrate its German subsidiary, Opel, more abundantly into its worldwide product plan that results in superior products, rising sales as well lower costs.

All in all, things look bright for General Motors going forward. The company is nicely positioned to outsmart peers, specifically Ford. Thus, I think General Motors is the best stock to buy in the automobile sector.